Aerospace and defense technology firm Merlin jumped in premarket trading after announcing that its AI-powered autonomous flight software for the C-130J Super Hercules cargo plane, developed with U.S. Special Operations Command, is moving toward formal testing.

Merlin wrote in a press release earlier that its AI-powered autonomous flight software has "successfully completed" the critical design review for the C-130J, adding the "milestone positions the program to enter a structured formal test campaign, including aircraft-level testing, reflecting a disciplined systems engineering progression from design through verification."

The Merlin AI Pilot will automate flight operations for the C-130J from takeoff to touchdown and is framed as an "operating system" for autonomous aviation.

The C-130 is the workhorse cargo plane of the U.S. military. The upgraded version, by slapping a "J" on the end, includes:

• Newer turboprop engines

• Six-blade composite propellers

• Digital cockpit and avionics

• Reduced crew requirements

• Better range, climb, speed, and fuel efficiency than older C-130s

Shares of the micro-cap defense company jumped 28% in premarket trading.

Merlin also pointed out that it is "rapidly advancing its AI-powered autonomy stack onboard the C-130J, with potential pathways for expansion across other Department of War or commercial aviation platforms."

The rise of "war unicorns" has been an important theme this year as the Department of War resets its procurement program toward startups and away from big legacy primes.

Goldman analysts also recognize the rise of defense startups and sat down with Palmer Luckey's Anduril earlier this week. Read the note here.